Monday, March 23, 2015


This is the title of a paper by Connolly and Krueger, actual Ivy League economists. 

Here's a link:

For some aspiring musicians it may be an interesting read.

I came upon it via Paul Krugman, an actual Nobel prize winning economist, who linked directly.   He regularly writes about music that he likes, but in my infrequent readings this is the first I've seen him refer to the economics of music.  An article about his recent SXSW appearance speaking on the same topic is quoted below.

...Krugman proceeded to speak with more sense than just about anyone else...The music business is going through a huge period of introspection amid the rise of streaming music platforms, and the decline of CD sales and digital downloads (and somewhere in all this is a surprising resurgence for vinyl). But Krugman said the primary way for artists to make a living out of music is no different than before. “It has always been live performance,” he said. “There is really no reason to think that’s going to change.” 

It’s tough for artists to make money out of recorded music, but it always has been, he noted. Arcade Fire lead singer Win Butler, seated next to Krugman on the panel, concurred. “Essentially artists have been getting screwed over at the same rate since the beginning,” Butler said. Now, he argued, it’s just different middlemen doing the screwing. 

Krugman worries that there is a “1% phenomenon” emerging in music, which perhaps offers a parallel to the broader problem of inequality in western economies—another concern of Krugman’s. “The share of those revenues going to a few bands at the top has massively increased,” he said. As Krugman himself noted, not everyone can command high ticket prices and fill out arenas to make a viable living from music. “I actually don’t quite understand how the bands I like are even surviving,” he said. “It’s remarkably tough out there.”

In his column he echoes that sentiment again, "I think about how easy I had it — my very first teaching job paid the equivalent of about $60,000 in today’s dollars — and am deeply thankful that so many wonderful talents love music enough to stick it out and enrich our lives."

The paper that is the title of this blog post has interesting anecdotes such as the following about contract enforcement.

The following remark by Sharon Osbourne (2002; p. 56) underscores the difficulty of contract enforcement in the concert industry: “My husband’s whole career, people stole from him. They walk off with thousands of dollars that’s yours. So the only way, unfortunately, for me is to get nasty and to get violent.” She described the following disagreement with John Scher, a legendary New York promoter, who claimed advertising expenses for ads placed long after a concert had sold out: “[H]e would not give in, and he was threatening that ‘Ozzy will never work in the New York area again.’ All this crap. So I got up and nutted him with my head, and then I kicked him in the ….” Caves notes that contract enforcement in this industry relies heavily on repeated transactions among parties who value their reputations. The Osbourne method is apparently another contract enforcement mechanism.

Applied music

Definition of APPLIED MUSIC. : vocal or instrumental musical performance subject to instruction in college or school as contrasted with musical theory and literature —called also practical music. According to Merriam-Webster.

That's funny.  I thought I just like music.  Now I know that I listen or dance to applied music. Kind of a weird upgrade of terms from "music" to "applied music".

Tuesday, January 13, 2015

Salary discussion

Suppose you are a student now and perhaps your parents are generous and provide you with $100 per week to spend on gas, occasional meals out, movies, and other entertainment.  You live at home and everything else is basically free, if you don't count chores or attendance at family dinner as costs. You might be pretty happy.  What would you need to earn on your own in order to support $100 per week of discretionary spending?  Let's estimate it.

Let's assume the national average savings rate is about 10%*.  This means that after all other expenses are taken care of that people save 10% of their earnings, on average.  If you were average later in life and wanted to have $100 per week spending cash and you DIDN'T want to have any savings, then you could use what you would otherwise have saved for fun.  Sounds like a reasonable trade, right?

Since you are average, you could be saving 10%, but you're spending it instead.  $100 is 10% of $1000, so you need to take home $1000 per week.  Chances are you are working at a legitimate job, so you have taxes taken from your paycheck.  Taxes are withheld at about a 15% rate (no doubt an underestimate of all withholding, since this just accounts for the Federal part) so that means that you need to make about $1175 per week or $61,000 per year.  $61K just to have $100 spending cash each week??!!!!  Yup.  That's the estimate.

Please consider a roommate or two, minimal health insurance, gifts from parents, driving old cars and bikes, eating lots of soup and pasta and other cost-saving measures to help pay for your $100 per week spending cash.  It's not a lost cause: Your investment of time now could lead to better financial success later on, but you shouldn't count on buying a new musical instrument unless you play harmonica. 

This also explains why so many actors are also waiters.

* tells us that the savings rate is currently closer to 5% and reached a nadir of 2.4% in mid 2000s.  One has to go back to the 80s to see a savings rate of 10%.